Venezuela’s ‘Petro’ Launch Was Amateur Hour

A last-minute blockchain switch saw scammers trying to cash in on the confusion.

On Tuesday, Venezuela completed the first phase in launching the first ever state-issued and oil-backed cryptocurrency, called the Petro—and it got weird.

A Petro token was released in a pre-sale stage using a different technology than was stated in the white paper. This change was effectively announced without fanfare in a Petro buyer’s manual that the Venezuelan government released on Tuesday. The Petro white paper—an important document that lays out the technical foundations of a cryptocurrency—initially stated that the Petro token would exist on the Ethereum blockchain and be coded as a smart contract, but it was actually released as an asset on NEM. This opened the door for scammers to try and cash in on the confusion.

NEM, short for New Economy Movement, is a blockchain that’s been around since 2015 and is secured by a more egalitarian (compared to Bitcoin and Ethereum) “proof-of-importance” algorithm that selects miners based on how much NEM they have rather than how much capital they own in terms of computers and money to pay for electricity. This potentially makes it more in line ideologically with Venezuela’s socialist President Nicolas Maduro, but when NEM’s official Twitter account confirmed that the Petro token is on its blockchain, it also noted that the NEM Foundation does not make political endorsements.

"The NEM Foundation is not involved with this project and we're not in a position to control any open source projects," NEM Foundation spokesperson Alex Tinsman wrote Motherboard in an email. "The NEM Foundation has a clear purpose to introduce, educate, and promote the use of the NEM blockchain technology platform on an international scale to all industries and institutions. Really, it doesn't take much to learn how to use NEM's tech. It's intuitive and built for enterprise so we see all kinds of projects being built on it."

Even so, it just so happens that a meetup for people interested in NEM is planned to take place on Wednesday in Caracas, Venezuela’s capital.

So, this blockchain or that blockchain—who cares? Putting aside Ethereum’s larger community than NEM and the simple fact that by employing different technologies they both come with a different set of technical guarantees, switching blockchains in the space of two weeks from a white paper release is amateur hour. It is genuinely unclear what happened here; the Spanish white paper accessible on the official Petro site still says Ethereum, while the English white paper says NEM. Also, I still haven’t received an email 24 hours after signing up to purchase Petro (as a test, of course), and others have tweeted about experiencing this, too.

This confusion also opened the door to a few different scams.

Perhaps leveraging the public’s expectation that the Petro token would be on Ethereum, at least three different Ethereum tokens calling themselves the “Petro” (two of them—one on Twitter and one on 4chan—actually pretended to be Venezuela’s Petro) seized the opportunity to ask people to send them digital coins. Yet another unrelated Petro coin experienced a nearly 100 percent jump in price after Venezuela launched its token.

It’s also worth noting that the Petro white paper contains language like “the presale token will not be part of the Petro network until Petro distribution” and “the token may be exchanged for Petro,” suggesting that these Petro pre-sale tokens may not be Petro proper and the final product may not be on NEM.

These scam campaigns were probably not very successful, although the address listed by the scam token on 4chan contains $420 USD worth of ether, Ethereum’s in-house cryptocurrency. Meanwhile, Venezuelan President Maduro says that the Petro token sale on NEM has raised $750 million so far. It should be noted that this figure does not seem to be verifiable on the blockchain yet, and one NEM account that observers have flagged as potentially being the Petro account does not reflect that figure.

Still, it’s early days for the Petro and a state-issued cryptocurrency is truly unlike anything the world has seen before, for better or for worse. But this… this is not a great start.